Accounts Receivable Have Been Grouped into the Following States

question 41

Essay

Accounts receivable have been grouped into the following states:
State 1: Paid
State 2: Bad debt
State 3: 0-30 days old
State 4: 31-60 days old
Sixty percent of all new bills are paid before they are 30 days old. The remainder of these go to state 4. Seventy percent of all 30 day old bills are paid before they become 60 days old. If not paid, they are permanently classified as bad debts.
a.Set up the one month Markov transition matrix.
b.What is the probability that an account in state 3 will be paid?

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Definitions:

Contractual Obligation

An agreement that legally binds two or more parties to specific actions or non-actions.

Commission Of A Tort

The act of committing a wrong that is recognized by law as grounds for a lawsuit, typically involving injury to individuals or entities.

Partners' Liability

The legal responsibility shared by partners in a partnership for the debts and obligations of the business.

Convict On Parole

An individual who has been released from prison before completing their sentence under certain conditions for good behavior.